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Taking the temperature of health care part 4: Placing blame

Editor’s note: This is the fourth article in a five-part series on the cost of health care in western Wisconsin. Get caught up on the series here.

Whether you are purchasing health insurance for your employees, buying your own insurance privately or on the government marketplace, participating in a healthcare sharing ministry, or opting not to purchase health insurance, it has become a frustrating, stress-inducing experience.

The blatant politicization of the health care system holds consumers hostage leading to anxiety and uncertainty. Even with insurance, practically every health care decision today has also become a financial decision and that makes people more than a little uncomfortable. Patients can pay thousands of dollars for care and barely benefit from their insurance.

Are we approaching a point where the cure is becoming worse than the disease?

To find out, RiverTown Multimedia asked the CEO's of four local hospitals to answer five questions about the state of health care in our backyard. Here is Part Three of the discussion.

  • Steve Massey, President and Chief Executive Officer, Westfields Hospital & Clinic
  • Alison Page,  Chief Executive Officer, Western Wisconsin Health
  • David Miller, President River Falls Area Hospital, Allina Health
  • Thomas Borowski, President Hudson Hospital & Clinic

Question #4

To a lay person, it frequently sounds like Medicaid and Medicare are blamed in substantial part for contributing to our current healthcare malaise. Is that true or are they being scapegoated to divert our attention from more pressing problems? Could Medicaid and/or Medicare play a role in the formation of a single payer solution?

Why or why not?

David MillerDM: This is a great question. I would say that Medicare and Medicaid definitely have challenged our healthcare system, however, Medicare and Medicaid are often forces for innovation and positive disruptive change within the healthcare system because they are such large purchasers of services. The private market is often in the position of following the direction of Medicare and Medicaid.

The question of single payer is being hotly debated right now. Here are my criteria for the healthcare system I would like to see, regardless of who is the payer:

1.) Provide meaningful coverage and access to care for the most people

2.) Design a system that incents all players (consumers, providers and payer) to seek/provide the right level of care, in the right location at the right time.

It is hard to imagine designing any health care system without looking towards Medicare and Medicaid, though we are challenged by two things:

First, Medicare and Medicaid are not particularly good payers for the services we provide, since they reimburse providers at or below cost. Second, even within those programs, Medicare doesn’t cover everything (examples: pediatric services or nursing home care), and Medicaid benefits vary state by state. Therefore, one of the important questions in that debate is what the public expects in their health care delivery system and what they would be willing to actually support with their tax dollars. I am not sure that I know the answer to those critical questions.

Steven MasseySM: Across the country, you've got state Medicaid that pays less than cost, so that compresses the viability of clinics and hospitals to stay in business. That deficit is shifted to the non-Medicaid payers. Medicare picks up a little bit of it, but that then compresses everything that is left to the commercial payers so they are subsidizing people who don't have insurance and people that are on Medicaid.

Thomas BorowskiTB: I don't think that's (scapegoating Medicare and Medicaid) fair personally. It's complicated. You can't blame it on any one part including the government for the high costs. Medicare and Medicaid are vitally important pieces of the care people need in our country. In the healthcare industry, it's not uncommon for 70 or 80 percent of your costs to be attributed to 20-30 percent of your patients. It's an inverted pyramid. Better preventative care can lead to less acute care and that can begin to balance the pyramid.

SM: I don't think Medicare and Medicaid are the sole reason why costs have risen overall, or why more of the cost-sharing has been shifted toward commercial payers. They are not the silver bullet solution. Some of the costs are tied to the changing health of the general population. We're approaching a tipping point. Different projections have it at 2022-2025, but half the population is going to be impacted by diabetes. It requires billions of dollars to manage a chronic disease, whether it's a type one or type two or pre-diabetic diagnosis. With more and more people living with conditions like that, it just costs more to take care of those folks. A lot of us are a lot less healthy than we were. We're living with a lot more chronic diseases; that is one of the contributing factors to the overall cost structure of the healthcare system.

TB: I believe there is less incentive for cost control in a single payer system. When you have more choices, more competition, the economics of it provides more of a push on price and cost and those type of things.

Alison PageAP: It's backward. If you're on Medicare or Medicaid, you can get your care anywhere, you don't have to go through a certain network. Isn't that the model that would allow for the greatest competition? I can go anywhere for my care and the U.S. government is going to allow me to do that. Basically, the three big care systems, Fairview, Allina and Health Partners, are dividing up the Twin Cities and western Wisconsin market. Those large systems competing right next to each other also create a lot of redundant services.

We have an assumption in the United States of America, that capitalism is a great thing, and that competition in a market will drive costs down and quality up because it does for lawnmowers. That is not true for healthcare. Competition drives costs up in healthcare, just like competition in basic primary education is not going to drive quality up and costs down. It's going to drive costs up and quality down. It's a skewed assumption. Look at some of the stories recently in the New York Times or other newspapers or online about the big purchases like the pharmacy CVS' purchase of Aetna, the big insurance company. Why are they doing this? CVS is a for profit organization. They’re buying it because you can make one heckuva lot of money owning healthcare.

AP: The federal government determined that there are some hospitals that they just needed to support for emergency services or there would be no services in that location. They named those hospitals critical access hospitals. Western Wisconsin Health is a critical access hospital as is River Falls as is New Richmond. You get paid differently from Medicare in a critical access hospital. They will say, we want to make sure you have an emergency department so we'll cover 100 percent of the costs to run an emergency department. Just tell us what it costs you to run that emergency department and we'll give you that money from the federal government. So we are different. We get paid differently from Medicare than say United Hospital in St. Paul. There is something called the Cost Report. You have to put what is an allowable cost in the cost report. Take our inpatient unit downstairs. If we have 100 patients a year in the unit and 60 of them are Medicare patients, Medicare will pay us 60 percent of what it costs to run that department. The other 40 percent we have to get from the insurance companies that cover those other patients. That how all critical access hospitals run. The cost report helps sustain small hospitals so they can be there for the communities, but it won't pay the whole bill.

Could you run a hospital at Medicare rates? Probably not. You can't get by on just what Medicare would pay especially if you're a large hospital and you give them that fee schedule, absolutely not. They pay 100 percent of the cost but there are a lot of things that are not allowable, like in the inpatient unit, the cost of nursing care is covered but cost of having a doctor there providing the care is not covered.

SM: A single payer system limits the ability for organizations to think outside of the box, to be open to new things, and push the envelope to look for new ways to deliver care, because there aren't those incentives. Competition breeds ingenuity. That's where we would lose out on some of those breakthroughs.

AP: Regarding a single payer. I think it may be inevitable, but is not essential. My personal opinion, the people who think that single payer systems are the evil enemy that we need to fight are the organizations that are making a ton of money on the current healthcare system. There are organizations that are getting absolutely filthy rich and making a ton of money on healthcare. They're basically skimming operations, skimming money off the top of healthcare and that money is not going to patient care. When a company is willing to pay billions of dollars to buy a healthcare-centered business, we need to ask why are they willing to do that? Because they are going to make more money and they are going to pull that money out of healthcare. The single payer system is a threat, it would get rid of those kinds of opportunities. They try to protect those opportunities by convincing people that the single payer system will ruin your healthcare, your life.

When I say “skimming” I mean that health insurance companies are making huge amounts of money.  Where is that money coming from? The pockets of customers and care delivery organizations. Example: You have to have health insurance because the risks associated with becoming ill and incurring huge costs is too great.  Your health insurance company turns to hospitals and clinics and says, “You need to discount your fees 20 percent to be in the pool of hospitals and clinics my customer can go to.” So, the insurance companies are in effect, skimming off of the health care dollar. This results in less money in the patient’s pocket and less funds allocated to the actual care delivery.